Up, Up, and Away

Another promising local tech startup is leaving Pittsburgh for Boston. Why? As Willie Sutton never said, because that's where the money is, and moving is what the money wants.

Cori Shropshire's P-G report on the impending departure of Logical Therapeutics does a good job of pointing out some of the other problems that keep Pittsburgh biotech/biomed startups on the launch pad for other destinations:

(1) Depth. Boston has it; Pittsburgh doesn't. "Moreover, biotech firms are risky, so it's difficult to persuade experienced workers to relocate to Pittsburgh without guarantee of success, [Logical Therapeutics co-founder Carolyn] Green said. In Boston, there are several hundred companies where workers can go if a venture doesn't work out, she said." I've written about this before.

(2) Infrastructure that supports biotech operations. "Despite the University of Pittsburgh Medical Center's global reputation in basic research and clinical trials, particularly in drug development, 'What's missing is the expertise in designing and carrying out early tests for new drugs, managing the federal regulatory process and manufacturing material used in clinical trials,' [Logical Thereapeutics c-founder Dr. Mitchell] Fink said." I may not have blogged about that problem before, but I've certainly heard about it in private conversations. Pittsburgh has a lot of magnificent scientists, and Pitt and UPMC are getting better at pushing technology into the private sector. But the regulatory gauntlet is daunting, and there aren't enough people in town who are trained to manage it.

Updated and extended with most of the text of a comment that I left on an earlier Pittsblog post:

Is LT's departure fair to PA taxpayers, in view of PA-subsidized investments in the firm? One thing to note is that PA taxpayer money in LT (or in any private co. with university-developed technology) may be dwarfed by indirect money coming from the federal treasury. Pitt and UPMC take in several hundred million dollars in federal grant money each year, a huge chunk of which goes into biotech/bioscience research. I don't know how much federal money went into the technology that LT is developing, but federal indirect cost reimbursement funds facilities that likely housed much of the early work.

Federal law (Bayh/Dole) gives university researchers using federal funds the right to patent and license resulting inventions; the researchers split licensing proceeds with their employers under the terms of policies set by the employers. Here, that means Pitt and UPMC. State interests usually end up taking a back seat to federal policy. Biotech investing is a particularly high-stakes version of poker, and state-related investment funds are playing with public money. But they are investors nonetheless, placing bets with their investments and hoping to win a hand or two. Returns are never guaranteed.

The question in my mind isn't whether the PA funds are entitled to their money back, but whether they should be playing at all, given the amounts that they are able to invest, and the stakes. Are they are playing at a table where they don't have enough cash to compete effectively over the long term? Biotech and biomed investing is a long-term game, and every play is risky. While LT is leaving with PA money and has chance to succeed elsewhere, would we as PA taxpayers be happier if it stayed in Pittsburgh -- and was more likely to fail? Personally -- no. Remember, you're a federal taxpayer as well as a PA taxpayer. When you combine your taxpaying hats, that's the point at which you should ask whether you're getting a fair deal while the government invests your betting money. In some ways yes, you are, and in some ways no, you're not. I'll save more for a later post.